Phase I - Core Transformation Journey Starting Out

8/2/2019 Phase I - Core Transformation Journey Starting Out

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Phase I of theCore Transformation Journey:Starting Out


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The expected benefits of core systems

modernization – agility, integration, efficiency and

reduced maintenance costs – should make it an

easy sell. But in reality, executive leadership is

often caught up in an intractable analysis of risk

versus reward. How can operational teams

present a convincing case for core systems

transformation that will justify both its considerable

cost and risk? And having secured approval, how

can they bring all key stakeholders, in whom the

responsibility of implementation actually vests, on

board?

Admittedly, this is not an easy task. To be

compelling, the core systems proposition must

address the major concerns of the bank’s top

management in the following ways:

• Show that it is supportive of long term strategy

• Justify the cost through ROI analysis

• Create a framework to assess impact on

stakeholders and business value

• Present a fair assessment of risk and mitigation

• Craft the implementation strategy to suit risk

appetite and desired timelines

• Have a plan for managing organizational change

The fact that core transformation strengthens the

bank’s foundation and hence enables it to achieve

long term objectives must be highlighted at the

outset. It is more convincing to talk in specific

terms - detailing intermediate milestones and

ways to get there, for instance - than make

sweeping statements. Hence, the business case

must be broken down into smaller projects each of

which improve operational performance, fulfilstrategic objectives or create value for

stakeholders.

Primarily, top management wants to know how

much the investment in core banking

transformation will yield by way of returns, and

how long it will take to do so. Hence, the business

case must employ realistic and relevant

illustrations to address these questions upfront.

For instance, how much of system maintenance

costs will core transformation save? By how much

will it bring down time to market for new products?

Will faster and better processes bring down error

incidence and manpower costs?

Besides the above, transformation yields several

benefits that are not easily quantified, but are

nonetheless very important, for instance,

regulatory compliance. An attempt must be made

to attach monetary value to such benefits by

breaking them down into their lowest

denominators so that their financial impact

becomes more visible.

The case for core transformation becomes even

stronger if it can be demonstrated that the

renewed systems will help the bank overcome itsbiggest pain points. For example, a bank

struggling to expand its international footprint

riding on an outdated system will be very

interested in a modern alternative that can be

easily extended to new geographies.

It is equally important to present the downside

fairly. Typically, replacing a mainframe with a

Unix-based system calls for additional skills and

investment. Transformation also carries a certain

amount of risk. The business case is not complete

without an analysis of these aspects.

Most transformation fears arise from the

uncertainty surrounding the nature and magnitude

of its impact. Much of this can be alleviated by

having a mechanism to quantify the impact of

transformation on the organization. Whentransformation risks and rewards are reduced to a

number, it makes it easier for top management to

weigh and indeed, come to a decision.

The impact assessment framework must be

aligned with the organization’s principal objectives

– for instance, if shareholder value is paramount,

the framework should assess whether

transformation is earnings accretive or attritive.

Similarly, it must describe how changes in

processes or organization structure might affect

stakeholders.

Show that it is Supportive of Long Term Strategy

Create a Framework to Assess Impact on

Stakeholders and Business-value

Justify the Cost through R AnalysisRROI


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All transformation carries risk, and all top

managements know that. The chances of getting

their approval improve with a business case that

tells it like it is, with an unbiased assessment of

risks, their likelihood, potential impact and

mitigation.

Banking transformation extends way beyond

systems replacement to bring into play

outsourcing, restructuring, change management

and rightsizing. What to do and how much

depends upon the banks’ individual situation. Asmall bank might go for a big-bang execution and

immediate switch over; a large one is unlikely to

take that risk, and will probably insist on phased

implementation.

But in general, since information on the payback

from long transformation programs is not easily

available, senior managements tend to be wary of

projects with front-ended expenses and

back-ended results. Hence, it is important to

second-guess the management’s patience level,

desired timelines and accordingly present a plan

that accelerates value realization by securing

quick wins and reducing the time to go-live.

Showing top management that it is possible to

mitigate transformation risk through phased

execution also improves the probability of getting

them on board.

Managing organizational change is one of the

critical success factors of transformation. Often, it

is not accorded the priority it deserves, with

disastrous consequences. The plan for managing

and communicating change – including its impact

on people, processes, resources, policies etc. –

must form part of the initial presentation to top

management. Banks have been known to keep

transformation plans under wraps, fearing

organization backlash as a reaction to change.

Having a clearly defined roadmap for changemanagement will give them the confidence to

make the decision public and get all key

stakeholders involved from an early stage. This

could make the difference between success and

failure.

People issues are the biggest barriers to

acceptance of the need for core banking

modernization. The bank must overcome the

following challenges in order to secure the buy-in

of all stakeholders:

Identify all stakeholders: Transformation has

wide-ranging impact, affecting all functions

including, but not limited to, IT, Business,

Operations, Sales and Service, Risk Management

and Finance. It is important to identify and notify

all those who will be affected well in advance.

Drive different stages of transformation through

the right stakeholders: Contrary to popular

perception, core systems transformation is not the

exclusive preserve of the IT department, although

they have an important role to play. The

involvement of key stakeholders changes along

the journey. IT may play a large part during

initiation, but once the project has the approval of

senior management, business users must takecentre-stage. Every phase of the transformation

life cycle calls for participation from one or several

teams; it is vital that the right people are involved

at the right time to the right extent.

Involve stakeholders early: Obviously, if the bank

expects all key stakeholders to participate in the

transformation process, it must get them on board

early in the day. This means seeking their

contribution at every step, starting with building

the business case. Stakeholders must also be

involved in key decisions, to the extent necessary.

Having approved the project, senior management

must lend its efforts to securing the acceptance of

people down the organization.

Once all stakeholders are recruited, they must be

assigned clear roles and responsibilities. For

instance, many people will be entrusted with

execution, others with facilitation and only some

with decision making – it is critical that everybodyunderstands what is expected from them.

Phase I of theCore Transformation Journey: Starting Out

R

Craft the Implementation Strategy to Suit R isk

Present a Fair Assessment Rof Risk and Mitigation

R

Appetite and Desired Timelines

Have a Plan for Managing Organizational Change



Author

Balwant C SurtiHead - Solutions Architecture and Design

Group, Finacle

Infosys Technologies Limited

Assess impact fairly and correctly: Transformation

impacts many, if not all people within the banking

organization and not always to their advantage.

While it is important to assess both risk and upside

across the organization, caution must be

exercised while making these known. Invariably,

transformation leads to hard measures like

cutbacks, retrenchment, redeployment and

outsourcing; if the messaging surrounding these

actions is not delivered with sensitivity and

discretion, the project might even be stonewalled.

It is equally important to articulate the expected

benefits of transformation from the audience’s

perspective, in a language they understand. For

instance, a risk manager is more likely to give the

nod if he understands that transformation will

reduce non-compliance by 90%, whereas the call

centre head cares more about customer service

levels.

Handle the change well: Involving the

organization’s change management team from

the outset is the key, because they know best how

to handle large - scale transition. If the bank does

not have such a function, it must put one in place

prior to start-up.

Recognize and respect organizational

boundaries: Any transgression of organizational

policies, ethics, budgets or guidelines must be

communicated clearly in advance. The bank must

not mistakenly assume that a departure from

status quo will always be well received. There

should be a separate plan for tackling any

negative repercussions of overstepping such

limits.

Communicate effectively: Since communication is

the key to securing the buy-in of various

stakeholders, it must come into play from the

beginning and endure over the life of the

transformation journey. While only senior

executives may be privy to transformation plans in

the initial stages, the lower levels of the

organization must be progressively brought into

the loop. While it is important for individuals or

members of a unit to understand how

transformation will affect them personally, they

must also see the bigger picture, which is, what

transformation will bring to the organization as a

whole.

Phase I of theCore Transformation Journey: Starting Out



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Phase I - Core Transformation Journey Starting Out

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